Sublicenses, the Matryoshka of Publishing

One of my favorite podcasts is Stuff You Should Know, from the people at How Stuff Works. Each episode hosts Josh and Chuck give a primer on a different subject, on topics as varied as Jim Henson, gambling, sea monsters, cinnamon, boomerangs, The Hum, and leper colonies, and that’s just in the last month. Sometimes they’re serious. Sometimes they’re ridiculous. But they’re nearly always fascinating.

Photo by Salvatore Vuono courtesy of freedigitalphotos.net

While I can’t promise to ever be quite as entertaining, one thing I can do is explain how some of the facets of publishing work. I’ll start today with sublicenses—something I’m called on to explain fairly regularly—but if there are any other things about publishing you’d like to understand better, give me a topic in the comments and I’ll do my best to explain it or ask a colleague to take it on.

As with most things, there are exceptions to every rule, but here’s how sublicenses typically work:

So what’s a sublicense? Basically, when you sign a deal with a publisher, you grant them some rights and reserve others to yourself. (Those others are the ones that your agency would represent for you, which is where my job as Subsidiary Rights Director for DGLM comes in.) So let’s say you sign a deal with Random House, and in that deal you’d generally give them print book rights and e-book rights, and you’d generally keep multimedia and film/TV rights. Other things will be a part of the negotiation your agent is doing, like audio rights, translation rights, and the breadth of the territory granted to the publisher in English. So let’s say you grant translation rights to the publisher as part of the deal. That means that the publisher is the party empowered to sell those rights to another publisher. When you do your deal with Random House, that’s a license. When they sell your French rights to, let’s say, Hachette, that’s a sublicense.

That part is relatively straightforward. The thing that tends to trip people up is the money. Now in your contract with Random House, terms will be set for how you earn money on that sublicense. Typically, Random House is going to get to keep 25% for their efforts. The other 75% is for you, but it’s not really going straight into your pocket. When Hachette pays Random House, 75% of the money goes into your royalty account and works to earn back your advance. Advance with RH already earned out? Great, then that money is coming your way soon. Advance with RH still left to earn back? Then the money isn’t going to leave Random House. The French rights are part of what they bought from you in that advance, so they can use their French deal to earn back that investment.

Think of sublicenses like Russian nesting dolls full of coins: your deal with Random House is the biggest of the dolls. When that dolls is full of coins—meaning once your royalty account has earned as much as they advanced you—the coins that don’t fit (aka, the amount above the amount previously advanced to you) come spilling out and get paid out to you!* But inside your deal with Random House is Random House’s deal with Hachette, and that doll starts off empty, too. Hachette paid an advance to Random House, which added to the coins inside the larger doll, but then the Hachette doll has to fill up with earnings from the French sale of the book. Once the Hachette doll is full, coins spill into the Random House doll, and if the Random House doll is full, they spill over to you. And yes, there can be a third doll inside the Hachette doll, where Hachette sublicenses, say, French audio rights. As you might imagine, the French audio nesting doll is pretty tiny and doesn’t always exist.

So, does that make sublicenses clearer? Or are you now just wondering why I think nesting dolls have coins inside them? Any other questions about sublicenses? And what topic should I tackle next?

*We don’t really pay our clients in coins. But if they chose to withdraw their money from the bank in coins so they could Scrooge McDuck it up, we would never judge.